Navigating the Well-Being Effects of Monetary Policy: Evidence from the Euro Area

Volume/Issue: Volume 2023 Issue 248

Publication date: December 2023

ISBN: 9798400260674

$20.00

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Topics covered in this book

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Economics- Macroeconomics , Economics / General , Demography , Monetary policy , Subjective Well-Being , Survey data , Euro Area , monetary policy announcement , standard deviation monetary policy shock , well-being effect , IMF working paper 23/248 , monetary policy surprise , Income , Aging , Asset prices , Global

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Summary

Central banks have recently adjusted their communication strategies to enhance engagement with the general public, yet there is limited understanding of public sentiment regarding monetary policy announcements. This paper investigates whether monetary policy announcements influence household (subjective) well-being in Germany over the period 2002-2018 and finds that tightening surprises reduce life satisfaction. Notably, the impact of a one standard deviation monetary policy shock on well-being is equivalent to a 4% decline in household income. This effect is particularly pronounced among middle-aged individuals and those belonging to the middle-class.